THE UNITED COMMERCIAL BANK LTD., CALCUTTA versus THE COMMISSIONER OF INCOME-TAX, WEST BENGAL

Citation: [1958] 1 S.C.R. 79 · Decided: 23-05-1957 · Supreme Court of India · Bench: NATWARLAL HARILAL BHAGWATI · Disposal: Appeal(s) allowed

Judgment (excerpt)

-
S.C.R. SUPREME COURT REPORTS 
THE UNITED COMMERCIAL BANK LTD., 
CALCUTTA 
v. 
THE COMMISSIONER OF INCOME-TAX, 
WEST BENGAL 
(BHAGW ATI, VENKATAAAMA AYYAR and 
J. L. KAPUR, JJ.j 
79 
Income Tax-Business loss of Previous 
Year-Set-off against 
income of the Assessment Year-Income from "Interest on sec11-
rities"-Banking business-Securities, part of trading assets-
Indian Income-tax Act, 1922 (XI of 1922), ss. 6, 8, 10, 24(2). 
For the assessment year (1945-46) the assessable income of 
the appellant bank was computed by the Income-tax Officer by 
splitting up its income into two -heads "interest on securities" 
and "business income", and deducting the business loss from 
interest on-securities. In the previous year the assessment showed 
a loss which was computed by setting off the 'business loss" 
against "interest on securities". The appellant claimed that in 
the computation of its profits for the assessment year in question 
it was entitled to set off the carried over loss of the previous 
year under s. 24(2) of the Indian Income-tax Act, 1922. The 
Income-tax Officer rejected the claim on the ground that the loss 
was under the head "business" and so could not be set 
off 
against income from securities under s. 24(2) of the Act. Both 
the Income-tax Appellate Tribunal and the High Court, on 
reference, held that in view of ss. 6, 8 and 10 of the Act "interest 
<>n securities" could not be treated as business income and there-
fore the appellant could not claim a set-off under s. 24(2). 
On 
appeal to the Supreme Court it was contended for the appellant 
that (1) ss. 8 and 10 should be so read that where the securities 
in the hands of an assessee are trading assets, s. 8 would be 
excluded, being restricted to capital investments only, and the 
matter would f~ under the head "business" within s. 10, and 
(2) in any case, even if the income from securities fell under s. 8, 
the appellant would be entitled to a set-off under s. 24(2) because 
it carried on only one business, namely banking, and the holding 
of secutiti.es by it was part of the said business. 
Held, that the scheme of the Indian Income tax Act, 1922, 
is that the various heads of income, profits and gains enumerated 
in s. 6 are mutually exclusive, each head being specific to cover 
the item arising from a particular source and, consequently, 
"interest on securities" which is specifically made chargeable to 
tax under s. 8 as a distinct head, falls under that section and 
cannot be brought under, s. 10, whether the securities are held as 
trading assets or capital asset. 
M2SC·61-6 
1957 
May23 
80 
SUPREME COURT REPORTS 
[1958J 
1957 
Commissioner of Income Tax v. Chunni/a/ B. Mehto, (1938) 6 
The United 
I.T.R. 521, Salisbury House Estate Ltd. v. Fry, (1930) 15 T.C. 266, 
Commercial Bank Con1mercial Properties Ltd. v. Commissioner of Income Tax, Bengal 
Ltd., Calcutta 
(1928) 3 l.T.C. and H.C. Kothari 
v. 
Commissioner of Income 
v. 
Tax, Madras, (1951) 20 I.T.R. 579, relied on. 
The Co1n1ni.ssioner 
of Income-tax, 
The question whether the holding of securities by the 
West Bengal 
appellant formed part of the same business within s. 24(2), could 
not be decided in the absonce of a finding that the securities in 
question were a part of the trading assets held by the appellant 
in the course of its business as a banker, and the case, was remit· 
ted to the High Court fo·r a fresh decision on the reference after 
getting from the Tribunal a fuller statement of facts. 
Kapur J. 
CIVIL APPELLATE JURISDICTION : Civil 
Appeal 
No. 161 of 1954. 
Appeal from the judgment and order dated May 
18, 1953, of the Calcutta High Court in Income-tax 
Reference No. 72 of 195f. 
• 
N.A. Palkhivala, P.D. Himatsingka, J. B. Dada-
chanji, S. N. Andley, Rameshwar Nath and P. L. Vohra, 
for the appellant. 
G. N. Joshi and R. H. Dhebar, for the respondent_ 
1957. May 23. The Judgment of the Court was 
delivered by 
KAPUR' J.-This appeal brought on a certificate 
of the High Court raises a point of far-reaching 
consequence as to the interpretation of ss. 8, IO and 
24(2) of the Indian Income-tax Act (hereinafter termed 
the Act). 
The assessee (who is the appellant before us) claims 
that in the computation of its profits for the assess-
ment year under review (1945-46), it is entitled to set 
off the carried over loss of the previous year against 
the profits of the year of assessment under s. 24(2) of 
the Act. The assessee is a Bank carrying on banking 
business.

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